Question

In periods of rising prices, the inventory method which gives the lowest possible ending inventory cost is the (A) FIFO method. (B) LIFO method. (C) weighted-average method. (D) lower of cost or market inventory method.

Answer 1

Answer: The answer is (B) LIFO method.

Explanation: The LIFO (last in, first out) method of inventory costs states that the most recent units are the first to leave. Therefore the oldest units are left in inventory.

In periods of rising prices the oldest units are the lowest cost units.